On April 22, 2020, the US Department of Health and Human Services (HHS) announced the process and priority for the next release from the Public Health and Social Services Emergency Fund (the Fund) with an additional $40.4 billion to be distributed to providers over the next several weeks. HHS also announced a process for providers to seek reimbursement for treating uninsured patients.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act established the Fund to provide financial relief to healthcare providers affected by the Coronavirus (COVID-19) pandemic. This release follows the $30 billion distribution to Medicare fee-for-service (FFS) providers on April 10, 2020.
This week, The Paycheck Protection Program and Health Care Enhancement Act (H.R. 266), signed into law on April 24, 2020, added $75 billion to the Fund, bringing the total to $175 billion. After the distributions described below, $104.6 billion remains.
• HHS allocated $20 billion for general distribution in addition to the original $30 billion distribution.
• HHS will distribute the total $50 billion based on providers’ share of 2018 net patient revenue. HHS estimates that total 2018 net patient revenue is $2.5 trillion.
• HHS separately targeted $10 billion to COVID-19 hotspot hospitals, $10 billion to rural health clinics and hospitals, and $400 million to Indian Health Service facilities.
• HHS established a website describing the process to request reimbursement for COVID-19 testing and treatment for the uninsured.
• HHS acknowledged that several provider types, including skilled nursing facilities, dentists, and those who predominantly serve Medicaid patients, still will receive little or no relief from the Fund.
• According to HHS, providers must accept the agency’s Terms and Conditions, which merit careful review and consideration.
$20 Billion Additional General Allocation Focused on Medicare Facilities and Providers
HHS began distributing an additional $20 billion to Medicare facilities and providers, including hospitals, physicians and group practices, surgery centers, labs, home health agencies, etc. on April 24, 2020.
The initial $30 billion was distributed in proportion to a provider’s share of 2019 Medicare FFS reimbursement. The second wave allocates the total $50 billion based on 2018 net patient revenue. How much a provider receives from the second distribution will depend on their 2018 net patient revenue and the provider’s FFS distribution. The amount of FFS Medicare a provider has will impact the size of their distribution in this round. Providers with less FFS revenue may see larger distributions in this round than they saw in the first round. Those with larger FFS Medicare revenues may see smaller distributions in this round.
Providers can use this formula to estimate their distribution:
(Individual Provider 2018 Revenue/$2.5 Trillion) X $50 Billion = Expected General Distribution
HHS will require total patient revenue data to distribute the additional $20 billion. For providers that submit cost reports, HHS distributed payments on April 24, 2020. These providers are instructed to enter the HHS portal to enter revenue information for verification purposes. Providers who do not file cost reports will need to submit revenue information through a portal if they want to receive funds. Note that the revenue information providers submit may later become public.
HHS directs recipients with questions to visit the Provider Relief website or call the CARES Provider Relief line at (866) 569-3522.
Terms and Conditions
HHS is instructing all providers who receive general funds to attest and agree to certain Terms and Conditions within 30 days of receiving the funds. The Terms and Conditions include significant provisions around provider eligibility, how funds can be used, reporting requirements, rules related to executive compensation and restrictions on balance billing. Providers should keep careful record of their COVID-19 expenses and revenue losses, and how they use these funds. The agency has stated that HHS and the Office of Inspector General will engage in significant auditing and anti-fraud work to ensure that funds are spent properly. Providers that retain payments for 30 days without contacting HHS regarding remittance of those funds are deemed to have accepted the Terms and Conditions. Providers who fail to comply with the Terms and Conditions are subject to recoupment actions.
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Targeted Allocation of Funds to Hotspots, Rural Providers and Indian Health Service Facilities
HHS will also distribute funds to certain high-impact sectors, including $10 billion to hospitals in areas that have been particularly affected by the COVID-19 outbreak, $10 billion to rural health clinics and hospitals, and $400 million to Indian Health Service facilities.
HHS allocated $10 billion to hospitals in areas highly affected by the COVID-19 outbreak. In order to account for uninsured and low-income patients and the disproportionate burden of COVID-19 on minority communities, the distribution of these funds will also take into account facilities’ Medicare Disproportionate Share Hospital adjustment. To receive these funds, hospitals were required to provide information through an authentication portal by 3:00 PM ET on April 25, 2020. Hospitals applying for these funds reported their total number of intensive care unit beds as of April 10, 2020 and total number of admissions with a positive diagnosis for COVID-19 from January 1 to April 10, 2020. Because New York accounts for 40% of US COVID-19 cases, HHS anticipates that $4 billion will go to New York hospitals.
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Rural Health Clinics and Hospitals
HHS will distribute $10 billion to rural health clinics and rural hospitals as early as the week of April 27. HHS will use operating expenses as the methodology to proportionately distribute payments to each facility and clinic. HHS likely will use Medicare cost reports as a basis for determining operating expenses. HHS indicated that these funds will go to entities including approximately 1,100 affiliated rural health clinics and more than 1,300 freestanding rural health clinics.
It remains unclear how HHS is defining “rural” for purposes of this distribution. HHS agencies and programs deploy at least a half-dozen different definitions of the term. The definition HHS adopts will be key, and may leave some providers excluded and frustrated.
This $10 billion is in addition to the $165 million that the Health Resources and Services Administration awarded through CARES Act funding to support rural communities.
Even prior to the COVID-19 crisis, the financial outlook of rural hospitals and clinics was bleak, with a record number of rural hospital closures in 2019. Rural hospital profit margins are about half those of urban hospitals, and many rural hospitals run on negative margins. This precarious financial position renders them especially vulnerable at this time, making them a priority healthcare sector for HHS and Congress.
Indian Health Service Facilities
HHS will distribute $400 million to Indian Health Service facilities. This funding will be distributed as early as the week of April 27, on the basis of facility operating expenses. In allocating this funding to the Indian Health Service, HHS acknowledged that COVID-19 is severely affecting the Native American population and straining their already beleaguered health system capacity.